Business Commercial Property

Thursday 22 March 2018

Nama caught between Rock and hard place as sell-off ramps up

UP FOR GRABS: Loans belonging to Topaz Oil are believed to be wrapped up in Project Evergreen, as the Anglo and Irish Nationwide loan books are divided into projects for the sell-off
UP FOR GRABS: Loans belonging to Topaz Oil are believed to be wrapped up in Project Evergreen, as the Anglo and Irish Nationwide loan books are divided into projects for the sell-off
The successful bidder is believed to be fund giant Apollo

Peter Flanagan Commercial Property Editor

IT has been billed as the great sell-off. Loans from the former Anglo Irish Bank and Irish Nationwide with a par value of some €22bn are up for sale, and they have to be gone by the end of the year if at all possible.

Since Minister for Finance Michael Noonan kicked off the sale process of IBRC's remaining loans during the summer there has been huge speculation about the sell-off, but little in the way of concrete news.

The loans have been split into four "projects", depending on the type of borrowings they are. Since Project Evergreen – made up of corporate loans with a par value of around €3.5bn – hit the market in September, potential investors have been poring over the data related to the loans as they seek to put a reasonable value on the loans today.

What isn't eventually sold will be taken on by Nama where they will be run down along with the rest of the agency's assets that can't find a buyer.

So how likely is that scenario?

Will all €22bn worth be successfully sold off, giving the taxpayer at least some sort of return?

Or is Nama's portfolio about to get a lot bigger?

International investors such as the likes of Pepper, Kennedy Wilson and Blackstone, have all made major moves into Ireland during the bust, and they are believed to be among the groups that are at least mulling over bids now.

The portfolios are available as one lot but more than likely will end up being broken up and dispatched in a piecemeal manner. That is likely to mean a good proportion of those loans will ultimately avoid going into Nama.


If Project Sand is the weakest of the four portfolios, Project Rock is seen as the strongest.

The sale process for the €7.8bn Project Rock portfolio of mostly UK commercial real estate loans formally began at the end of October, with potential buyers that have expressed an interest in the loans being given access to detailed information on the portfolio.

Importantly, "Rock" is seen by analysts as by far the most attractive portfolio.

The portfolio comprises €6.1bn UK property loans, around €930m in German loans and the balance, and just under €550m in UK loans.

Close to €2bn worth of Rock is tied to commercial property in and around London, where property prices are surging, to such an extent that the effects of the 2008 crash have been almost completely wiped out.

The scale of Rock is breathtaking. The portfolio covers more than 100 hotels, 250 shopping centres, and over 400 pubs.

In the year to the end of September, this portfolio produced rental income of well over €900m.

Sources close to the sale process have described the levels of interest in the portfolio as a "frenzy" and that is not surprising.

One agent described Rock as the "crown jewels" of the remaining IBRC loans.

"There are high quality assets here. If any of the projects are to be 100 per cent sold, this will be the one," he said.

Chances of a full sale: 4/5


Made up broadly of European commercial property, Stone was the last project to come to market when the process began this week.

The €9.2bn loan book is a mixed bag to say the least. It contains everything from hotels in Eastern Europe to residential developments in the Algarve in Portugal.

Interest in this portfolio is expected to be mixed, to say the least.

While there are some worthwhile assets in play here, barely a third of all loans are classed by IBRC's special liquidators as "performing".

Chances of a full sale: 2/5


Evergreen was the first of the four portfolios to be formally put on the market in September.

The sell-off is a three step process – indicative bids, final bids, and the formal payment and transfer.

A data room for the Evergreen loans was opened in mid-September, with phase two of the process starting last Monday.

The €3.5bn worth of borrowings are largely corporate loans involving some of the best-known Irish businesses.

Topaz Oil, TV3, and Arnotts are believed to be among the borrowers whose loans are wrapped in Evergreen.

Even at this stage companies with loans included in Project Evergreen can try to refinance their borrowings and get out of the process, but that is understood to be a much tougher process than it might appear to be on the face of it.

Businesses with multiple borrowings have to refinance them all at the same time. They can't do a deal on only one loan and leave others untouched.

So will Evergreen be sold? The portfolio is seen as something of a mixed bag within the property industry.

One analyst summed up the general feeling in the market when he told this newspaper there was some good and some very bad loans wrapped up in the portfolio.

Still, big US investors including Apollo and Loan Star – which specialises in distressed debt – are known to be sniffing around the portfolio.

Ultimately, some of the loans will be worth buying, but whether the garbage that goes with them will scare off bidders is the big question.

Chances of a full sale: 3/5


Sand is very much the runt of the group. Made up of about 13,500 Irish Nationwide mortgages, Sand is considered the lowest rated portfolio by some distance.

With a par value of €1.8bn, the first phase of the sand process began in October and is expected wrap up this week.

The second phase – when binding bids are formally handed in – will probably happen next month, but only if there is any interest in the loans.

That is very much an open question at this stage. Potential bidders have been looking at the loans closely, but for many would-be buyers they will be the definition of "toxic".

It is understood that there has been some interest expressed in the Irish Nationwide loans but in the market there is scepticism that a buyer will be found for Project Sand.

Having said that, as any business person will say, it only takes one buyer to make a market.

Chances of a full sale: 1/5

Sunday Independent

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